Domestic & International Term Life Or Cash Value Insurance
Some people are told to buy term life insurance and then invest the difference. While this may be an option, it may not be the best course of action. Most experts will try to sell you cash value policies because when you compare apples to apples it makes more sense depending on the policy; make certain that you review the life insurance company rating as well as the policy. These policies have a savings plan attached, which can help you save and grow your money tax-free for retirement while carrying life insurance. It is important to understand both types of insurance before being persuaded to buy one or the other.
When you have a cash value plan, it may be difficult to plan your financial goals. There are many rules and regulations involved with cash value policies. This is why many people opt for term life. To some people, it can be simpler to understand. Basically, with a term life policy, you pay the premium and receive the life insurance coverage for the term of the policy. Most term life policies can be compared by price. There is a very competitive market and term life insurance companies want to sell you their product.
Some term life policies are convertible and renewable. This means that when you purchase a policy and the term is up, you can renew the policy without having to have a medical exam. With some policies, you may be able to also convert your policy into a cash value policy, provided the cash value policy is from the same provider. While these are nice features, not all policies offer them. If you want your policy to be convertible or renewable, make sure to ask the agent if their policy offers these features.
The advantage of a cash value policy is the ability to save. The savings portion of the policy is tax-sheltered and can be guaranteed against losses of principle while going up when the market goes up. While many workers now have other investment and savings options, such as IRAs and 401(k) plans, those plans do not offer principle protection – did you lose money in your IRA or 401(k) over the past 12 months? In addition, the investments associated with a cash value policy are sometimes limited to market indexes, but again some are guaranteed to never go backwards. Typically, variable life policies will offer index funds as an investment option, but in most cases you will want to avoid variable life policies because they do not have principle protection.
If you are currently involved in estate planning, you may want to consider a cash value policy. Some financial advisors will recommend this type of policy as a way to avoid paying more taxes on your savings. While this is a possibility, this should not be your primary reason for choosing a cash value policy.
One of the reasons many people do choose a cash value policy is to help build their retirement savings. Most people already have a retirement plan in effect, whether it is an IRA or a 401(k). If you are among the few who do not have a retirement savings plan, a cash value policy may be the perfect choice. This policy is a term life policy with the added advantage of a savings account attached. As you approach retirement, term life insurance will be very expensive if you do not already have a policy. This is one case where a cash value policy will be the better choice.
This type of policy has a death benefit, so you will be able to leave your savings from the policy to your spouse should you die. As mentioned, as you age, the cost of term life insurance will be much higher. It is best to obtain life insurance coverage as early as possible to avoid increased costs and hassles.
Cash value plans promote savings. While this is a great benefit, other tax-sheltered retirement plans can do the same thing. However, if you do not have an alternative retirement plan in place, a cash value policy would be your best choice.
Each person will have their own unique set of needs as they approach retirement. Choosing the type of life insurance policy that is best for you will take some time. It is important to get all the facts about the two types and compare the pros and cons. This is the only way you will be able to determine what policy will be best. Do not be persuaded to purchase any policy until you are completely familiar with all advantages and disadvantages associated with the particular policy.
If you and your family are living paycheck to paycheck and do not have a surplus at the end of the month to save, but you want to make sure that if something happens to the primary income earner the rest of the family has money as insurance, then international term life is perfect for your situation. If you are not in this scenario, cash value life insurance is probably a good fit for your needs.